Nepal tourism industry, which was all set for a turnaround this autumn, has been devastated, first by the international media's coverage of the weeklong blockade, then by the blasts near Soaltee Crown Plaza and finally by last week's riots.

The rebels had selected top companies from each sector- tourism, garment, carpets, even gas stations and bus companies-for indefinite closure since 17 August. On Friday, 34 other business houses were told to close, or else. As if to drive home the point, the Maoists exploded three bombs at Malla Hotel on Tuesday night.

The rebels say their demands for labour reform have not been met. FNCCI Chairman Binod Bahadur Shrestha says labour issues can be sorted out, but it is clear the Maoists are only using the closure to pressurise the government.

Nepal's business and industry has never faced a crisis of this magnitude before. Aside from the thousands who have lost their jobs, the closure of hotels like Soaltee have a huge indirect impact on the tourism industry, which in turn multiplies the impact on ancillary businesses dependent on tourism. In addition, there is the huge loss of revenue to the government. Surya Nepal alone has an annual turnover of Rs 4.8 billion and pays Rs 2 billion in taxes to government coffers. Surya's closure also affects hundreds of thousands of tobacco farmers and their families in the tarai.
"The country will lose nearly Rs 8 billion every day because of the closure of 46 companies by the Maoists," says industrialist Rajendra Khetan, whose company that produces Mayos instant noodles is among the 35 additional business houses the Maoist are closing. "It will directly snatch away jobs of more than 100,000 workers." (see interview, pg 9)

Workers who face the threat of layoffs are placing increasing pressure on the Maoists to allow the industries to reopen. The Maoists issued a statement on 27 August saying all industries except those with American investment could reopen. But hopes were dashed when within a few hours they clarified that this didn't apply to businesses already closed. Then, the very next day, they threatened the closure of the Middle Marsyangdi hydro project, which is being built with a German grant. Then on 29 August they bombed the Nepal Lever factory in Hetauda, causing Rs 70 million in damages even though this is an Indian joint venture. The government has now deployed the army to guard the facility, but managing director of Surya Nepal, Sanjeev Puri told us, "We will only reopen after the situation returns to normal."

But no one can define what exactly 'normal situation' means. The Maoists have told the businesses this is their way of putting pressure on the government to release their comrades, and the rebels have asked them to intercede on their behalf if they want their industries to open. Makalu Yatayat's Birendra Bhakta Shrestha puts it simply: "We are being held hostage by politics."

By choosing prominent targets, the Maoists have ensured that this time they have hit where it hurts. The Soaltee group had 80 percent occupancy on the day it was closed and it was booked for several high-profile regional conferences in August and September. Government officials have openly questioned why Soaltee had to close when it was promised all security. But management says as a part of an international chain it can't legally afford to stay open.

Besides the Maoists, businesses blame the government for not doing enough to address the rebel demands and tactically give in on some of them to get the industries reopened. Chairman of the Hotel Association of Nepal, Narendra Bajaracharya, says: "Closing Soaltee affects the entire hotel industry." More than half the bookings in other hotels were cancelled after word spread internationally that the Crowne Plaza had been forced to close.

Similarly, the closure of Surya Nepal will have an enormous impact on foreign investment.Indian Tabacco Company owns 58 percent of Surya, while British Tobacco Company controls two percent and various Nepali individuals and businesses own another 38 percent. (Kiran Nepal)